History will soon define the ongoing foreclosure crisis as one of the single greatest transfers of wealth in the US from middle and working class communities and communities of color to large financial institutions and wealthy investors and speculators. Instead of homeownership being associated with a hopeful pathway to the middle class for millions of people, the last five years have associated it with the loss of home, the loss of a family’s life savings and assets, the loss of financial security, and the loss of neighborhood stability.
It will take decades for families and communities to recover. While the fraud and irresponsibility of the financial sector in precipitating this crisis is undisputable, people still blame themselves for their losses. Shame and self-doubt compound the suffering of seniors on fixed incomes who were victims of mortgage theft, children who live with the indelible sense of instability and stress, families set back in their dreams and hopes, and people knocked down at their most vulnerable times.
While these families have struggled, banks have made record profits and not one executive has been sent to jail for their role in the foreclosure crisis. Imagine if it were different and if those responsible for the “wild wild west” of mortgage lending — all the way up the chain of command — were held to account. What if the perpetrators actually had to make whole the millions of people who were harmed? What if Main Street was bailed out by Wall Street?
We can look back to the Savings and Loan Crisis of the mid-1980s for a few ideas. It was a smaller scale crisis, but people went to jail and strong regulations followed. One meaningful forward-thinking resolution that came out of this crisis was the creation of Affordable Housing Program (AHP). Funded with 10% of the net income of Federal Home Loan Banks each year, AHP now describes itself as “one of the largest private sources of grant funds for affordable housing in the United States.” The program has contributed over $4.6 billion to affordable housing since 1990. While these funds were tiny compared to the scale of the Savings and Loan Crisis, the program’s funds have built more than 776,000 housing units, of which 60% are for very low-income residents.
Imagine if one of policy responses to the current foreclosure crisis was for major banks to give significant grant funds to support the development and preservation of affordable housing in hard hit communities. To date, most of the corrective measures taken have involved a hodgepodge of federal and state programs and legal settlements that have had very little clear impact in these communities. Instead, a meaningful response could be to ensure that families and seniors in the hardest hit communities could access quality stable affordable housing to rebuild their economic and emotional lives, and start to save again.
Instead, families are facing skyrocketing rents, a flat economy, a potential federal sequester which would cut hundreds of thousands of people off rent supports, and local jurisdictions that have limited resources to intervene in distressed neighborhoods or prevent homelessness.
To add insult to injury, some of the very people that cooked up the fraudulent secondary mortgage market schemes that fueled the housing bubble and bust, are now spearheading the massive real estate investment buying spree of bank owned single family homes. Banks are giving hundreds of millions of dollars in lines of credits for these firms to purchase thousands of homes in cash. Companies like Blackstone Group fix up and rent the properties, generating revenue while the property values appreciate. Then they will probably turn around and sell those properties, and another wave of displacement will hit our communities. And so the story goes, the cycle of asset theft and plundering will continue with no regard for creating new paths for affordable homeownership.
In the absence of such a comprehensive program, many community organizations are creating exciting and innovative pilot programs that could change this course with the right support. A number of groups are trying strategies to buy properties facing foreclosure at market value from the banks, and reselling the homes back to their owners or renters with a mortgage that they can actually afford. Boston Community Capital’s SUN Initiative has successfully launched such a program, and saved over 300 Massachusetts residents from eviction. This is a clear and feasible approach to avoid the cycle of loss and displacement, and keep people in their homes.
However, none of these programs will get to scale unless the government takes action to right these wrongs and banks commit to reinvesting in these communities. The cycle of wealth draining from middle income and working class communities and communities of color will continue unless the government holds CEO’s and institutions responsible, and creates programs and policies to jumpstart a safe affordable housing market that meets people needs.
Amie Fishman is the Executive Director of East Bay Housing Organizations (EBHO) in Oakland, California. EBHO is a 29-year old non-profit membership organization dedicated to preserving, protecting, and expanding affordable housing opportunities for the lowest income communities through education, advocacy, and coalition-building.